IMF: one-in-four chance of global recession caused by US debt crisis

The IMF says that the US debt crisis has a one in four chance of plunging the world into global recession.

America's mortgage crisis has spiralled into "the largest financial shock since the Great Depression" and there is now a one-in-four chance of a full-blown global recession over the next 12 months, the International Monetary Fund warned today.

The US is already sliding into what the IMF predicts will be a "mild recession" but there is mounting pessimism about the ability of the rest of the world to escape unscathed, the IMF said in its twice-yearly World Economic Outlook. Britain is particularly vulnerable, it warned, as it slashed its growth targets for both the US and the UK.

When all this started, how many people defaulted on their mortgages for God’s sake ? Or is this so called ” credit crunch ” really a cover for banking incompetence and greed, so that the ordinary guy is now paying through the nose for the stupidity of the financial sector ?

I believe that this is a sign that perhaps we shouldn’t put the collective world’s eggs in one basket. Especially when that basket is being swung about by a conscientiously, morally, and academically bankrupt president.

Despite my user name here, I am an American. Just wanted to clarify that.

I hate Bush, too, but I think it’s ok for the world to push along imperfectly, with a problem here or there, and for it to happen independently of his incompetence. I don’t see why he would be responsible, or even why he should even feel particularly compelled to be responsible. God help us if one elected official is somehow supposed to be in charge of a $13 trillion economy.

And, to clarify, in whole, the bankers, investors, and homebuyers, were ALL being unwise & greedy. I’m not generally one for nostalgia, but there was a time when if you wanted to buy a house that was more than you could afford, your friends & confidantes would tell you you were dumb & that you’d get what you were asking for if you went ahead with it. Today, apparently, making dumb decisions just qualifies you as a victim.

If we want to treat the buyers as victims, I ok with that, but as part of the deal, they should have to wear a red scarf around their necks for the rest of their lives, identifying themselves as minors under law, who cannot sign an enforceable contract without the support of a competent adult.

I don’t mean to be harsh. I realize financial difficulties are tough. I have my own. But I accept them as my own. Most of the foreclosed homeowners probably accept them, also, the ravings of do-gooders notwithstanding.

While the US president’s Lord-of-the-Flies approach to market oversight certainly put very few obstacles before greedy debt traders, you seem to be blaming the mayor for the crime wave. Or rather, blaming the voters who allowed the mayor to ascend to office only to preside over the crime wave.

Don’t let the mayor off the hook, but let’s not let him distract us from the actual robbers, eh?

I think, Kebko, that the reason people are so upset about this (apart from the obvious economic impact it’s having) is that it raises a lot of unpleasant questions about America in 2008.

Qustions like: is our economy really as solid as we like to think? Is owning a home the American Dream, or just a fantasy? Is the middle class ever going to catch a frickin’ break? Is the US ever going to get financially realistci, stop running deficits and incurring debt we can’t afford, both individually and as a nation?
Maybe we should (gasp) save more?

A nerve has been struck. It should have been struck long ago, in my opinion.

Per Bush: if the economy were going great guns, be sure he would be taking credit for it.

Presidents don’t control giant economies, but in a nation like ours where the Executive Branch has so moch power and influence, the question of whether it has helped or hindered the economy naturally arises.

Once again, don’t blame the mark for falling for the con. And I reject the idea that Bush is some kind of bumbling fool, he isn’t, he just plays one on TV. He has achieved all his objectives and then some.

@11 — The puppet doesn’t need to be intelligent to get things done; his master does.

The lack of compassion towards these “marks” throughout similar boingboing posts makes me ill. EVERYONE who falls for a con-man has made a “stupid” or “foolish” — at least preventable — mistake. That doesn’t give them blame to share. The moral importance in this case lies in intent. The lenders clearly had malicious and predatory intent. The renters/buyers were merely foolish. There is NOT an equivalency of blame between the two!

I’m always surprised at how many intelligent people are “dumbist” (ie, seem to hate/fear dumb people). Should everyone really be intelligent? Some of the most wonderful people I know are dumb as shit. Some of the worst people I know are intelligent. Being foolish or stupid should not be a cardinal sin…

I was listening to public radio and I’m not sure if the person being interviewed was aware of the contradiction she issued; on the one hand, Americans need to start saving more. On the other hand, Americans not spending like they usually do is what this downturn is all about!

The mortgage crisis may just be the straw that broke the camel’s back. As far as Bush’s responsibility in the pending economic collapse, here’s an interesting tidbit:budget projections
calculations show that there is a 7 trillion $ difference between the projected results of Clinton’s budget vs. Bush’s budget over the last 8 years.
That’s a lot of potential bailout money!

I’m always surprised at how many intelligent people are “dumbist” (ie, seem to hate/fear dumb people). Should everyone really be intelligent? Some of the most wonderful people I know are dumb as shit. Some of the worst people I know are intelligent. Being foolish or stupid should not be a cardinal sin…

It’s easy to blame people for their foolish acts while overlooking the root of their foolishness. Not to get too off topic here, but Americans aren’t really taught how to be financially responsible. It just isn’t part of the curriculum. Plus, we’re bombarded with “spend” messages all the time, everywhere. It takes real will power and financial knowhow to resist.

Are people to blame for their foolish acts? Yes, partially. Is that the whole story? Nope.

It’s the fault of anyone who doesn’t recognize and fight against the global scale idiocy of basing the world economy on finding a bigger sucker and passing the buck along.

That’s what this mess was. Everyone, but mostly the banks, decided that the best way to make money was to make something risky look like a good bet, and find suckers to sell it to. Eventually, you run out of suckers, and the whole thing is revealed as what most critics knew it was all along.

No one in charge is willing to change things to prevent this from happening.

Oh– I think it’s pretty clear that we CAN lay much of this at the feet of one George W. Bush, or if he is truly a puppet of others like Cheney, then at the hands of the puppet masters. Whatever happened to the good old days, when Republicans were pushing for a “balanced budget amendment”?

For years Republicans have pushed for de-regulation of industries, including banking, looking for some “pure” form of capitalism. Plus Republicans are always touting the benefit of having a businessman for president, someone who “knows how to run a company, and can balance our books”, so they elect Bush, who failed at every business he ever ran. By their own admission conservative economic policy is aimed at making the rich richer under the belief that it will drive the economy, unfortunately it eventually drives the economy over a cliff, because (as Everett Sloane said in Citizen Kane) “Well, it’s no trick to make a lot of money… if all you want to do is make a lot of money.” And often the richest of men ONLY care about making money, not about how it effects anyone else.

25% chance of worldwide recession? Too bad! If it was, say, a one-percent chance of scary movie terrorists doing something ostentatious, then the US government might move on it. Give some more tax breaks to deserving plutocrats, that sort of thing.

[Having a small posting problem. Appy polly loggies if this is a double.]

I was told that enlightened self-interest, the unerring forces of the free market, and the trickle down theory would make us all prosperous and happy.

What happened?

Self-interest has turned out to be not-so-enlightened, free market forces have been shown to be capricious and prone to bubbles, busts, and trends, and the “rising tide” that was supposed to raise all boats has raised a few yachts, and left the rest of us trying to keep our heads above water.

Who to blame?

OK, many people bought houses they couldn’t afford. We know that. Bankers with get rich quick schemes made bad loans. Check. But let’s look at the bigger culprits in our economic downward spiral.

Well, you can’t blame unions anymore for the flight of manufacturing jobs overseas, since they’re pretty much a thing of the past, as are the well-paying manufacturing jobs that used to fund the American Dream.

Corporate earnings are reaching record highs, yet the same businesses that are receiving tax cuts in order to bolster the US economy (according to the Theory) continue to export jobs overseas. Hmm… very little trickle down happening there.

Deregulation has been a boon to American industries and businesses, yet this freer hand they’ve been given has not resulted in an economic growth spurt. What gives? Maybe we haven’t deregulated ENOUGH. Yeah, that must be it.

Meanwhile, money needed to repair our infrastructure and fund our entitlement obligations (never mind anything as ambitious as a bailout) has been squandered in Iraq.

But let’s look at the phrase “squandered in Iraq.”

Those trillions of dollars have not been buried in some hole in Baghdad, nor have they disappeared into the pockets of Iraqi leaders or bussinessmen.

Where’s it gone? Where’s all that taxpayer money gone?
Into the pockets of Halliburton, Blackwater, and the like.

It’s time to face the fact that our economic system is nothing more than a very efficient way of channelling wealth from the lower and middle classes into the upper classes, by way of the federal government.

If you can exonerate George Bush and his fellow travellers from blame, then you have more imagination than common sense.

“If it was, say, a one-percent chance of scary movie terrorists doing something ostentatious, then the US government might move on it. Give some more tax breaks to deserving plutocrats, that sort of thing.” (#24)

Rather than taking back the federal government “for good, not evil”, let us empower the states in our *federation*. The US was supposed to be a federation of states: 50 (today) legislative laboratories, not the royal families of Bushes and Clintons we have now. Over the years, the definition of the term “federal” became inverted.

My liberal friends complain about the federal government’s power and misdeeds, but then believe everything will be solved when “Their Guy” wields that power. Don’t they see that power attracts evil and the White House will continue to switch hands between Evil and Less Evil, as long as the power of our nation is housed there?

The folks who signed those subprime mortgages were stupid, to be sure. But it’s not really their fault.

Buyers were assured by “financial professionals” that if they couldn’t make the payments, they could just sell their new house for the amount of the mortgage (plus possibly a profit) because the value of that house was sure to have risen since they bought it.

It’s when the values of all those houses failed to rise that the matter hit the impeller.

The real fools were the greed-blinded mortgage brokers who wrote those subprime loans, the banks who underwrote them then securitized the debt, and the investors who bought the resulting aubprime securities.

And now nobody wants to invest in anything, which is where the spectre of recession comes into play.

Libertarians can posit their anti-federal future utopia, socialists can argue for redistribution of wealth, anarchists can hope for the elimination of government all together, etc., etc., but I don’t expect to see a reorganization of the American polity in my lifetime.

So… given the fact that we need solutions now, I’ll restate my assertion: we need to put people in power that are fighting for everyone, not just for the corporate oligarchy. This is a lot more feasible as a short term goal than dismantling the Union.

where will we find shelter? Gold? Land equity is too flaky. Drugs? In times of trouble,people need to forget. Drugs then. Film? Escapist film boomed in the Depression years…. they won’t pay you anything to MAKE it though….. organs! organs of the poor! A new underclass wil flood the market at first, btu there must be a way….

“This journey began with a wizard walking into his door. Now it ends with a new kind of wizard standing on an Engine. Gazing down on this boiler from above, the wizard has the sense of being an angel or demon regarding Earth from Polaris. For, chastened by his failures, Mr. Newcomen has become most regular in his practices, and in this, his master-work, the seams and rivet-lines joining one curved plate to the next radiate from the top to the center just like meridians of Longitude spreading from the North Pole. Below is a raging fire, and within is steam at a pressure that would blow Daniel to Kingdom Come (just like Drake) if a rivet were to give way. But that does not come to pass. The steam is piped off to raise water, and the wasted heat of the fire affords a measure of comfort to the miners, and for the time being it all works as it is supposed to. At some point the whole System will fail, because of the flaws that have been wrought into it in spite of the best efforts of Caroline and Daniel. Perhaps new sorts of Wizards will be required then. But – and perhaps this is only because of his age, and that there’s a long-boat waiting to take him away – he has to admit that having some kind of a System, even a flawed and doomed one, is better than to live forever in the poisonous storm-tide of quicksilver that gave birth to all of this.
He has done his job.”

In case there is anyone who didn’t guess it: it is the last paragraph of Neal Stephenson’s “The System of the World”, last part of the Baroque Cycle and Science Fiction at its best in the true meaning of the word.

when we say “blame Bush”, we aren’t referring to that infantile pissy twit, we are referring to the hive of maniacs that pulls his strings. Anyone who doesn’t see this insane shitty cabal as being to blame for this massive orchestrated crisis, well, you were probably the ones confidently smirking “bubble? what bubble?” right up until the bottom started falling out hard.

#19, it must be so awesome to have that “oh yeah, it must be Bush’s fault” snappy comeback always at the ready.

The USA has expended her guns in an attempt to build permanent fort and secure oil. The army is in tatters, effectively, America’s guns are spent. Any projection of force credibility now rests on the nuclear trump card. Is Cheney trying to get nukes used in the middle east to pop that cherry so the sole remaining trump card will suddenly look playable? If imminent economic ruin precipitates atomic weapons use, will the “other side” – whoever that really is – use asymmetrical force and go WMD chemical/biological?

1) NICKD – Thank you for the results of what must have been many hours of thought. I read it all twice and it’s far more clear and concise than I could have stated it. Right on.

2) Why did bankers pressure people to take on too much mortgage debt and potentially risky interest rates? Profit. They make higher commissions on ARM loans and higher loaned amounts. I got a mortgage in 2000 and 2005. The assumption was that you would go ARM, and if you insisted on fixed rate they looked at you like a mental defective. Who’s laughing now? You can’t blame every naive buyer who believed a financial services professional and got in over their head, just some of them.

3) Who ‘controls’ house prices? Nobody. It’s a classic inefficient market. Each item is unique. Sales are infrequent. Buyers are inexperienced. The feedback loop to keep price in line with value is years long as opposed to commodities like pork bellies, gold or wheat, where it’s minutes and bubbles don’t happen.

4) TP1024 @34 – I remember reading that passage in the book in 2004. It seemed intended to make the point that the miners grew comfortable sitting on the edge of the boiler to warm themselves despite the potential for the boiler to explode and kill them. People accept new risks and stop worrying about them after a time.

Takuan: there’s another option this side of WMD that you’ve forgotten: the draft.

From what I’ve read, the whole mortgage mess was a game of hot potato, the potato being the bad loans. Once things started going south, the financial people started throwing the potato around. Now usually, someone gets stuck holding the hot potatoand it’s their tough luck–it’s only when enough of the other people in this little Ponzi scheme also got their hands burned that there was a fuss.

(I’m no economist, and I’m ready to be corrected if I’m wrong….)

Now, who do you feel deserves more scorn in this scenario? The homeowners who took a chance, and were financially ruined, or the financial wheeler dealers who were trying to make a dubious quick buck by playing fast and loose with other people’s money?

And oh yeah, lest I forget: Neal Stephenson is a genius. But you knew that already.

When I read it I had the impression that the emphasis was not so much on the failure of the system, but on the function it fulfils while it has not failed and the improvement that will be made once a failure has happened. (From the view of Daniel, old as he is and about to embark on a journey away from the – then – inevitable failure of the machine. And as you can see, the improvement made since that time has led to much less destructive failure modes.)